1. A coupon bond has 4 years to maturity and the yield to maturity of 10%. When the coupon rate increases, the duration of this bond decreases. (10points)

a. True b. False

2. A bond investor often resells puttable bonds for a discount bond. (10points)

1. True b. False

3. A call option on S&P 500 index has an exercise price of $4,000. The current index price is $4,100. The call option is an in-the-money European option. (10points)

1. True b. False

4. A US exporter has a 1,000,000 receivable due in one year. To hedge the position, it will buy put options on euro. (10points)

1. True b. False

5. The seller of a put option wants the value of the underlying asset to decrease while the buyer of a call option wants the value of the underlying asset to increase. (10 points)

a. True b. False